Bailey Products produces two joint products (A and B). Prior to the split-off point, the company incurs costs of $6,000. Product A weighs 30 pounds and Product B weighs 120 pounds. Product A sells for $100 per pound, and Product B sells for $35 per pound.
a. Based on a physical measure of output, allocate joint costs to Products A and B.
b. Compare the costs to the selling prices. Should the company sell products whose selling price is less than the allocated joint cost?